SMEs in Waste Management: Converting Trash into Treasure
Date Published: 2 Sep 2008
By Sasidhar Chidanamarri, Industry Analyst, Environment and Building Technologies Practice
"Wasted" Opportunities
Over the last five years, high GDP has transformed India into one of the world's largest
consumer economies. The rise in consumerism and changing lifestyles has added to the
woes of waste management in India. Unplanned urbanization has exposed the lack of
preparation for solid waste management in Indian cities. India is most likely to be one of the
largest producers of Municipal Solid Waste (MSW) in the next 5-10 years. The market
potential for Indian waste management is around Rs.20,280 Crore, if every ounce of waste is
managed effectively.
In 2007, an estimated 5 million tons of medical and 325,000 tons of e-waste were generated
in India. Industrial Hazardous Waste (IHW) was estimated to be 16.5 million tons, and the
total MSW generated was at 30 million tons in 2007. Fly ash generated from Thermal Power
Plants (TPPs) was estimated at 100 million tons. Figure 1 represents the total tonnage of
different kinds of waste generated in 2007 and expected to be generated in 2012.
Figure 1

Medical waste and e-waste contribute 9.6 percent, and 0.6 percent, respectively, to the total
waste. While IHW contributes 31.8 percent, MSW is the largest contributor with around 57
percent of the total waste produced in India.
In terms of revenue, MSW, IHW, medical waste, and e-waste contribute 48 percent, 41
percent, 10 percent, and 1 percent, respectively. Around 30 percent of MSW is contributed
by big cities such as Delhi, Mumbai, Chennai, Kolkata, and Bangalore. The MSW waste
management market in the above five cities was worth Rs.2,800 Crore in revenues in 2007.
Figure 2 displays the tonnage of MSW waste generated per day in each of the cities
mentioned above.
Figure 2
Waste Management Market: MSW generated in top five cities (India) 2007
Source: National Solid Waste Association of India

The Central Pollution Control Board (CPCB) of India has analyzed that as much as 94 percent
of the MSW, medical waste, and e -waste is dumped in open landfills, while only 6 percent
goes for recycling. This market, if effectively tapped, could unravel opportunities that the
SMEs can capitalize on.
Room for Private Participation
The Indian waste management industry is gaining global attention as it is in its nascent
stage. In order to tackle the mounting problem of solid waste, the Ministry of Environment
and Forests legislated the Municipal Waste Management and Handling Rules 2000, which
deals with the involvement of private agencies in waste collection and treatment. Waste
management has also gained significance with the launch of the Jawaharlal Nehru Urban
Renewal Mission (JNURM), according to which the Central Government contributes 35 percent
of the project cost, while the state government and municipal corporations add 15 percent
and 50 percent, respectively. In India, like in the developed countries, there is a strong case

of the project cost, while the state government and municipal corporations add 15 percent
and 50 percent, respectively. In India, like in the developed countries, there is a strong case
for bringing in the private sector to invest in waste management. The financial constraints
and lack of suitable staff have hindered municipalities from maintaining an efficient waste
management system. Private sector can bring in the adequate technical expertise, increase
efficiency, and improve customer service. It also brings in the capital required by
municipalities to support efforts toward effective waste management.
Many big firms are ready to step into the Indian market by adopting cost-effective and
innovative equipment. Multinationals have adequate capital, technology, and expertise to
offer innovative and cost -effective solutions and are ready to face low growth in the initial
stages in order to gain a share in the nascent market. Though MNCs are keen on entering
the Indian market, they have not been successful in capitalizing on the available
opportunities. This is due to a lack of preparation and knowledge about the Indian scenario.
Areas where SMEs can strengthen:
Legal difficulties to acquire approvals to set up treatment plants and multinationals entering
the Indian market are some of the major threats facing the domestic SMEs. Despite the
threats, SMEs have an edge over MNCs because they are familiar with the characteristics of
the waste generated in India and are capable of providing cost-effective and eco-friendly
solutions.
SMEs are competent in collecting and transporting household waste. They should also
actively participate and gain expertise in the higher levels of waste management hierarchy
like waste recycling and waste treatment, using greener techniques.
Recycling and composting are cost-effective and inexpensive in terms of adoption. SMEs who
find it difficult to raise capital should look into adopting such techniques and modify them to
suit Indian waste. SMEs can go in for composting since 55 percent of the MSW is biodegradable. The compost, derived out of the controlled decomposition, can be sold as
fertilizer to farmers and institutions that require manure for landscaping. Incineration along
with electricity production - cogeneration is also a viable alternative. Other possibilities
include advanced treatment methods like Gasification and Anaerobic Digestion or BioMethanation. Gasification is gaining ground as it has proved itself to be environment friendly.
But it is an expensive technique.
The power generated from the Bio-Methanation process is considered renewable and may
qualify for Certified Emission Reductions (CER) under United Nation's Clean Development
Mechanism (CDM). SMEs can sell or trade these CERs to companies in the developed world
that emit carbon dioxide gases at levels beyond those laid down by the Kyoto Protocol.
These are a few strategic channels through, which SMEs can look to raise capital and
increase profit margins.
The Government has implemented policies to safeguard the interest of the small sized
players in this industry. Previously, stringent regulatory listing norms prevented SMEs from
raising capital from the Indian bourses. Many SMEs in other sectors have raised equity on
London's Alternative Investment Market (AIM), which compelled the Indian Government to
create an atmosphere conducive for SMEs. The Security and Exchange Board of India (SEBI)
has approved a proposal to set up an exchange dedicated to SMEs, which would allow them
better access to risk capital. This exchange, expected to come into existence by end of
financial year 2008-09, would promote the country's SME segment comprising different
unlisted companies belonging to different sectors. Henceforth, SMEs can raise capital directly
through capital markets. Private Equity (PE) funds would be interested to invest more in
SMEs when they are listed because such exchanges will offer a clear exit route. The Small
Industries Development Bank of India (SIDBI) has plans to double the corpus of its venture
capital fund â&#x20AC;&#x201C; SME growth fund â&#x20AC;&#x201C; to Rs. 600 Crore to enable greater equity flow to the SME
sector. The growth of SMEs in the waste management sector lies in utilizing such avenues to
raise capital to bring in innovative technologies.
In the long run, there will be a fall in the municipal waste due to the implementation of
techniques such as reduce, recycle, and reuse. At this point, SMEs would need to look at
other avenues or areas of waste in order to maintain the pace of growth. However, due to
the growth of industries, the output of industrial waste is going to be high. Similarly, domestic

e-waste constitutes a small portion, but there is rampant dumping of electronic waste into
India in spite of this being banned under the Basel Convention. Waste generation from the
medical sector is growing at a rapid rate. Given the alarming rate of growth in these kinds of
waste, SMEs should look at gaining a stronghold in treating industrial, medical, and e-waste
in the future.
But management of industrial hazardous waste requires complex technical expertise, skilled
manpower, and resources. In the near future, SMEs should focus on MSW and medical
waste, as they offer growth potential and be ready to adopt inexpensive technology. But in
the long run, domestic firms should gear up and raise capital to tap the industrial waste
segment, which is expected to grow rapidly.
Looking Beyond
SMEs should aim to provide solutions that are highly price competitive because governments
look for the lowest offer. In order to establish themselves in the MSW segment, they should
ideally look at providing cost-effective solutions backed with modern environment-friendly
technologies. Keeping abreast of latest technologies is a better way to innovate, grow, and
become aware of opportunities and threats. SMEs should be aware of their core
competencies, which would help them realize their strengths and weaknesses. Domestic
players are losing their identity by playing a supporting role for the larger consortiums. In
order to become a complete player in waste management, they should look into diverse
areas of waste management such as treatment and recycling. This will give them a broad
field to play and will help them to realize better growth margins. Capitalizing on the
opportunities and harnessing the growth potential by choosing the right platform is essential
to sustain in this industry.
The need of the hour is to wake up to the impending threats in this market and adopt better
business strategies. They must entrench themselves before the international firms enter the
Indian waste management sector

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